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UNIVERSITY    OF    ILLINOIS    LIBRARY    AT    URBANA-CHAMPAIGN 


L161— O-1096 


BULLETIN  NO.  252 


BY  H.  C.  M.  CASE  AND  M.  L.  MOSHER 


URBANA,  ILLINOIS,  JUNE,  1924 


SUMMARY 

Farm  accounts  kept  by  nineteen  Woodford  county  farmers  led  them 
to  improve  the  organization  and  operation  of  their  farms  in  ways  that 
added  approximately  $650  to  their  average  net  incomes  in  1922,  the  seventh 
consecutive  year  in  which  they  kept  accounts. 

Uniform  records  kept  in  a  simple  farm  account  book  prepared  by  the 
University  of  Illinois  provided  the  means  of  finding  out  at  what  point  the 
farms  could  be  made  more  profitable. 

The  changes  made  on  all  or  part  of  these  farms  resulted  in  (1)  better 
crop  yields,  (2)  larger  returns  for  each  $100  invested  in  productive  live 
stock,  (3)  more  acres  of  crops  worked  per  man,  (4)  more  acres  of  crops 
worked  per  horse,  and  (5)  lower  expenses  for  each  $100  of  income. 

These  same  nineteen  farms  are  examples  of  the  wide  differences  in  earn- 
ings that  are  found  among  farms  in  the  same  locality.  The  seven  best  pay- 
ing of  the  nineteen  farms,  as  a  yearly  average,  made  4.52  percent  more  on 
the  investment  than  the  seven  poorest  paying  ones,  or  paid  the  operator 
$2,153  more  for  his  labor  and  management.  The  differences  in  management 
that  led  to  these  differences  in  earnings  are  analyzed  in  this  bulletin. 

No  farm  is  likely  to  excel  in  all  points  of  good  management.  The 
farm  which  does  fairly  well  in  most  of  the  factors  mentioned  above  (crop 
yields,  returns  on  productive  live  stock,  crop  acres  worked  per  man  and 
per  horse,  and  expenses  for  each  $100  of  income)  is  more  likely  to  prove 
profitable  than  the  farm  that  excels  in  one  or  two  factors  and  does  poorly 
in  others. 

Five  farms  that  were  better  than  the  average  in  four  of  the  five  factors 
discussed  earned  9.31  percent  on  the  investment;  or,  stated  another  way, 
they  made  $2,465  above  all  expenses,  including  5  percent  interest  on  the 
investment,  to  pay  for  the  operator's  labor  and  management.  Three  farms 
above  the  average  in  only  three  factors  earned  6.63  percent  on  the  invest- 
ment; or  made  $1,568  to  pay  for  the  operator's  labor  and  management. 
Six  farms  above  the  average  in  two  factors  earned  5.79  percent  on  the 
investment;  or  made  $965  to  pay  for  the  operator's  labor  and  management. 
Five  farms  above  the  average  in  one  factor  or  in  no  factor  earned  only 
4.03  percent  on  the  investment;  or  lacked  $65  of  paying  anything  for  the 
labor  and  management  of  the  operator. 

Other  factors  affect  farm  earnings,  but  the  five  used  here  to  measure 
farm  efficiency  indicate  some  of  the  more  important  reasons  why  farms 
in  the  same  locality,  with  similar  opportunities,  differ  so  widely  in  their 
earnings.  Operators  can  readily  apply  these  measures  to  their  own  farm 
operations  and  find  out  at  what  point  their  farms  might  be  more  efficiently 
run  and  their  profits  thereby  increased. 


INCREASING  FARM  EARNINGS  BY  THE 
USE  OF  SIMPLE  FARM  ACCOUNTS 

BY  H.  C.  M.  CASE,  ASSISTANT  CHIEF  IN  FARM  ORGANIZATION  AND  MANAGEMENT, 
AND  M.  L.  MOSHER,  ASSOCIATE  IN  FARM  ORGANIZATION  AND 

MANAGEMENT  EXTENSION 

As  Illinois  agriculture  has  developed,  capital  invested  in  farming 
has  increased  until  in  many  Illinois  counties  the  average  investment 
per  farm  amounts  to  $30,000  to  $50,000.  A  farmer  using  a  capital 
of,  say,  $30,000  in  his  business  can  well  afford  to  spend  the  necessary 
effort  to  ascertain  whether  or  not  that  capital  is  yielding  a  fair  rate 
of  interest  for  its  use.  At  5  percent  an  investment  of  $30,000  should 
yield  $1,500  for  the  use  of  the  capital  alone. 

The  fact  that  many  farmers  are  making  good  returns  on  their 
investment  while  others  fail  to  get  adequate  pay  for  the  use  of  their 
capital  indicates  the  need  for  a  system  of  accounting  which  will  show 
the  annual  farm  income  and  expenses  and  furnish  the  basis  for  an 
intelligent  study  of  the  farm  business.  (See  discussion  on  "Measur- 
ing a  Farm's  Success,"  page  182.) 

The  advantages  in  keeping  a  simple  financial  record  of  the  farm 
are  shown  in  the  results  obtained  by  nineteen  Woodf ord  county  farm- 
ers who  were  assisted  in  starting  accounts  on  their  farm  business  by 
the  University  of  Illinois  and  the  Woodford  County  Farm  Bureau 
and  who  kept  and  closed  the  accounts  for  seven  successive  years. 
The  added  profit  which  came  as  a  result  of  the  record  keeping  was 
determined  by  comparing  the  income  on  the  nineteen  farms  at  the 
beginning  and  at  the  end  of  the  seven-year  period  with  the  income 
from  farms  whose  operators  had  kept  records  for  only  one  or  two 
years,  and  by  studying  changes  made  on  individual  farms. 

These  nineteen  farm  records,  kept  over  seven  successive  years,  and 
making  in  all  a  total  of  133  farm-year  records,  are  valuable  in  show- 


NOTE. — The  authors  wish  to  acknowledge  the  work  of  other  men  who  did  much 
of  the  supervising  of  the  farm  accounts  reported  herein;  namely,  Assistant  Farm 
Advisers  E.  F.  Shaffer  and  P.  E.  Johnston  (now  Farm  Adviser  in  Woodford 
county),  and  F.  F.  Elliott  and  E.  L.  Donovan,  Farm  Management  Specialists  of 
the  Extension  Service  of  the  University  of  Illinois.  When  the  work  was  begun 
in  1916  the  writers  were  employed  as  Extension  Specialist  in  Farm  Organization 
and  Management  by  the  University  of  Illinois  and  Farm  Adviser  in  Woodford 
county,  respectively,  and  they  have  been  closely  associated  with  the  work  since 
its  inception.  As  head  of  the  Department  of  Farm  Organization  and  Management 
and  as  Vice-Director  of  the  Agricultural  Extension  Service,  Professor  W.  F. 
Handschin,  now  deceased,  gave  active  direction  and  encouragement  to  this  work. 

149 


150  BULLETIN  No.  252  [June, 

ing:  (1)  the  benefits  which  the  nineteen  farmers  realized  from  the 
continuous  study  and  improvement  of  the  organization  and  operation 
of  their  farms,  as  compared  with  men  who  had  not  kept  records  long 
enough  to  benefit  materially  from  their  use,  and  (2)  the  importance 
of  certain  factors  affecting  the  efficiency  of  the  farm  business. 

The  records  used  in  this  study  are  simple  financial  accounts  and 
not  in  any  sense  cost  accounts.  They  include  inventories  of  the  farm 
business  taken  at  the  beginning  and  end  of  the  year  and  a  record  of 
receipts  and  expenses,  together  with  a  record  of  the  amount  of 
products  raised  on  the  farm  during  the  year.  Cost  accounting  data 
secured  by  the  University  of  Illinois  and  other  institutions  have 
been  a  valuable  aid  in  helping  analyze  conditions  on  the  nineteen  farms. 

This  publication  does  not  attempt  to  establish  new  facts,  but  rather 
it  substantiates  and  emphasizes  facts  which  already  are  recognized 
by  the  most  successful  farmers.  An  attempt  has  been  made  to  present 
the  results  obtained  by  the  "Woodford  county  farmers  in  a  way  that 
will  point  out  the  advantages  in  keeping  simple  financial  records  on 
the  farm.  Only  a  few  simple  ways  of  measuring  the  farm  business 
are  suggested.  These  same  measures  can  be  readily  applied  by  any 
farmer  to  his  own  farm  if  he  will  keep  a  simple  but  well  organized 
system  of  accounts.1 

TYPE  OF  FARMING  IN  WOODFORD  COUNTY 

Woodford  county,  in  which  this  work  was  conducted,  lies  north 
of  the  central  part  of  the  state,  in  what  is  recognized  as  the  grain 
farming  section  of  Illinois.  The  prevailing  soil  type  is  brown  silt  loam, 
with  some  black  clay  loam  on  most  farms  and  a  little  yellow  gray 
silt  loam  on  a  few  farms.  The  value  of  each  farm  was  carefully  esti- 
mated on  the  basis  of  the  selling  price  of  similar  farms  in  the  same 
area  at  the  beginning  and  at  the  end  of  the  period  covered  by  the 
study. 

More  than  half  the  land  in  the  county  is  planted  to  cereal  crops 
each  year,  and  corn  normally  makes  up  well  over  half  the  cereal 
acreage.  Oats  rank  as  the  second  cereal  crop,  and  with  corn  make 
up  nearly  90  percent  of  the  total  acreage.  According  to  the  best 
information  available,  about  60  percent  of  the  corn  crop  is  sold  from 
the  farms,  the  sale  of  corn  being  the  principal  source  of  income. 

The  live  stock  produced  on  the  farms  is  fed  almost  entirely  upon 
home-raised  feeds.  Live-stock  production  is  very  definitely  a  part 
of  the  farm  business  and  is  carried  on  in  large  measure  as  a  means 


*An  inexpensive  farm  account  book  has  been  prepared  by  the  Department  of 
Farm  Organization  and  Management  especially  to  make  such  a  study  possible. 
Information  concerning  it  will  be  sent  upon  request. 


1984]  INCREASING  FARM  EARNINGS  151 

of  using  farm  raised  feeds  and  available  labor  to  the  best  advantage 
and  to  provide  manure  for  the  maintenance  or  improvement  of  the  soil. 
Approximately  50  percent  of  the  crops  is  utilized  by  work  horses  and 
other  classes  of  live  stock;  and  live  stock  harvest  directly  about  10 
percent  of  the  corn  crop.  In  value  of  sales  from  the  farm,  hogs  rank 
second  only  to  corn,  the  sale  of  hogs  being  more  than  double  the 
combined  sales  of  cattle  and  dairy  products,  which  are  the  second 
largest  source  of  live-stock  receipts. 

METHOD  OF  CONDUCTING  WORK 

During  the  spring  of  1916,  the  University  of  Illinois  and  the 
Woodford  County  Farm  Bureau  cooperated  in  helping  about  sixty 
Woodford  county  farmers  start  accounts  of  their  farm  business.  The 
simple  farm  account  books  used  for  this  purpose  were  prepared  by 
the  University.  At  the  end  of  the  year,  forty-eight  of  these  farm 
accounts  were  closed  and  the  farmers  assisted  in  analyzing  their 
businesses  as  represented  by  the  accounts.  The  number  of  farm 
records  closed  in  the  county  during  succeeding  years  varied  from 
thirty-five  in  1917  to  one  hundred  in  1921  and  ninety-nine  in  1922. 
Nineteen  of  the  original  forty-eight  men  continued  to  keep  and  close 
their  farm  records  during  each  of  the  seven  years. 

In  addition  to  the  service  given  these  nineteen  seven-year-record 
keepers  with  their  accounts,  most  of  them,  along  with  about  130  other 
farmers,  were  visited  by  the  farm  adviser  during  1916  and  1917  and 
their  farms  studied  with  special  reference  to  soil  and  cropping  prob- 
lems. Written  reports  of  such  visits  were  made  to  all  the  men  whose 
farms  were  studied.  These  reports  included  a  statement  of  the  plant- 
food  balance;  that  is,  the  approximate  amounts  of  nitrogen  and 
phosphorus  being  taken  from  the  fields  in  the  harvested  crops  and 
the  amounts  being  returned  to  the  soil  by  means  of  legumes  and 
manure.  Rotations  of  crops  and  soil  treatment  were  recommended 
that  would  help  maintain  the  nitrogen  supply,  replenish  the  mineral 
elements  in  the  soil  and  provide  for  a  uniform  distribution  of  labor 
thruout  the  year. 

Aside  from  the  work  on  the  farm  records,  the  men  who  kept  farm 
accounts  thruout  the  seven  years  secured  no  more  service  from  the 
farm  adviser  than  other  members  of  the  farm  bureau  with  whose 
farms  the  nineteen  farms  are  compared. 

During  most  of  the  seven  years,  auto  tours  were  conducted  to  a 
few  farms  on  which  various  practices  were  shown  by  the  farm  account 
book  to  have  been  especially  profitable.  During  three  of  the  seven 
years  special  farm  management  exhibits  were  featured  by  the  farm 
bureau  at  the  district  fair  held  in  the  county.  All  these  activities  led 
individual  farmers  to  adopt  more  profitable  practices. 


152 


BULLETIN  No.  252 


[June, 


BENEFITS  EEALIZED  FROM  KEEPING 
FARM  ACCOUNTS 

When  records  were  started  in  1916,  the  managerial  abilities  of 
the  nineteen  farmers  who  continued  the  accounts  for  the  seven-year 
period  were  very  little  superior  to  those  of  other  farmers  in  the  same 
community  who  kept  records  on  their  farm  business  the  same  year, 
and,  in  addition,  the  nineteen  farms  were  earning  about  the  same 
rate  of  interest  on  the  entire  capital  investment  as  other  farms  in 
that  section.  The  nineteen  farmers  that  year  realized  a  net  return 
of  7.09  percent  on  their  entire  capital  investment,  while  twenty-nine 
other  farmers  in  the  same  county  who  started  records  at  the  same 
time  but  who  failed  to  continue  them  thru  the  seven-year  period 
realized  6.92  percent  on  their  capital  investment,  or  only  .17  percent 
less  than  the  nineteen  farmers.  This  is  shown  in  Fig.  1  and  Table  1. 


Hates  Earned  in  1316 


Twenty-nine  first- 
year  farms 


Nineteen  seven- 
year  farms 


Bate  earned 


7.09% 


Rates  Earned  in  1922  After  Changes  Were  Made. 


forty-five  firjt  or 
.second-year  farms 


Nineteen  seven - 
year  farms 


FIG.  1. — BENEFITS  REALIZED  BY  NINETEEN  FARMERS  FROM  THE  KEEPING  OF  SIMPLE 

FARM  ACCOUNTS 

The  nineteen  men  who  kept  accounts  for  seven  consecutive  years  realized 
1.33  percent  more  on  their  total  capital  investment  in  1922  than  farmers  who  had 
just  started  to  keep  records.  Even  allowing  for  the  fact  that  these  nineteen 
farmers  made  a  slightly  higher  rate  on  their  investment  than  some  of  their 
neighbors  the  year  the  records  were  started,  they  still  made  1.16  percent  more 
in  1922  as  a  result  of  their  accounts. 

The  first  and  third  bars  in  the  above  chart  represent  the  farms  which  did 
not  keep  continuous  records.  Altho  the  rates  earned  in  1916  and  1922  varied 
greatly,  the  two  bars  are  made  the  same  length  because  they  both  represent 
earnings  which  had  not  been  influenced  by  the  keeping  of  accounts.  Differences 
in  farm  earnings  due  to  variations  in  price  levels  are  eliminated  in  this  way. 
The  second  and  fourth  bars  are  then  made  proportional  to  the  first  and  third  bars 
respectively. 


19S4] 


INCREASING  FARM  EARNINGS 


153 


It  also  will  be  noted  from  Table  1  that  the  investment  per  acre  on 
farms  in  the  two  groups  was  approximately  the  same. 

In  1922,  however,  after  seven  years  of  record  keeping  the  nineteen 
farmers  received  an  average  net  return  of  4.72  percent  on  their  in- 
vestment, while  forty-five  other  men  who  began  to  keep  accounts  in 
1921  and  1922  received  an  average  net  return  of  3.39  percent  on 
their  investment,  or  1.33  percent  less  than  the  nineteen  farmers  who 
had  been  keeping  the  accounts  for  seven  years.  Even  allowing  for 
the  slightly  higher  rate  (.17  percent)  earned  by  the  nineteen  farmers 
in  their  first  year  of  record  keeping  (1916)  above  that  earned  by  the 
twenty-nine  other  farmers  in  their  neighborhood  that  year,  it  would 
appear  that  these  nineteen  men  had  profited  in  1922  to  the  extent 
of  1.16  percen',  on  their  entire  capital  as  a  result  of  improving  the 
organization  of  their  farms  and  the  methods  followed  in  production. 

It  should  be  pointed  out  that  the  increased  earnings  of  1.16  percent 
credited  to  the  farm  management  work  are  conservative,  inasmuch  as 
the  forty-five  farmers  who  made  1.33  percent  less  on  their  capital 
investment  than  the  nineteen  farmers,  already  had  adopted  improved 
practices  by  1922  and  had  put  their  farms  on  a  better  paying  basis 
even  tho  they  had  not  previously  kept  records. 

The  small  difference  in  the  investment  an  acre  at  the  beginning 
and  end  of  the  seven-year  period  on  the  nineteen  farms  was  due 
mainly  to  increases  in  the  investment  in  live  stock,  machinery,  and 
equipment,  as  shown  in  Table  10  (lines  6  and  8),  page  178. 

The  average  capital  investment  on  the  nineteen  farms  in  1922  was 
$56,490  (Table  10,  line  3).  The  additional  net  return  of  1.16  percent 

TABLE  1. — A  COMPARISON  OP  THE  EARNINGS  AND  THE  NITROGEN  LOSSES  ON  FARMS 

WHERE  UNIFORM  FARM  ACCOUNTS  WERE  KEPT  FOR  A  PERIOD  OF  YEARS 

AND  ON  FARMS  KEEPING  ACCOUNTS  FOR  THE  FIRST  TIME 


19 

16 

19 

22 

Nineteen 
7-year 
farms 

Twenty- 
nine  other 
farms 

Nineteen 
7-year 
farms 

Forty-five 
other 
farms 

Rate  earned  on  investment1.  . 
Labor  and  management  wage1 
Total  investment  per  acre'  .  .  . 
Net  income  per  acre  

7.09% 
$1,458.00 
$   262.40 
$      18  61 

6.92% 
$1,555.00 
$   265.61 
$     18.37 

4.72% 
$340.00 
$269.40 
$  12.71 

3.39% 
$-264.00 
$    266.40 
$        9.03 

Net  loss  of  nitrogen  per  acre.  . 

25.4  lb». 

25.7  Ibi. 

27.2  Ibs. 

30.2  Ibn. 

Tor  full  explanation  of  these  terms,  rate  earned  on  investment  and  labor 
and  management  wage,  see  note  on  page  182. 

"These  valuations  represent  conservative  selling  prices  in  1916  and  1922.  Dur- 
ing 1919  and  1920  farms  frequently  sold  in  this  section  of  the  state  for  more  than 
$400  an  acre. 

The  minus  sign  (  — )  in  front  of  a  quantity  indicates  a  loss. 


154  BULLETIN  No.  252  [June, 

on  this  average  capital  amounted  to  $655.28,  and  it  may  be  said, 
therefore,  that  the  nineteen  farmers  who  kept  records  for  the  seven- 
year  period  realized  an  average  net  income  in  1922  which  was  larger 
by  approximately  $650  than  would  have  been  the  case  had  they  not 
used  the  accounts  to  determine  how  they  might  improve  their  farm 
business. 

Of  still  greater  importance  to  the  future  of  agriculture  is  the 
fact  that  the  nineteen  farms  showed  a  lower  loss  of  soil  nitrogen  at 
the  end  of  the  seven-year  period  than  did  the  forty-five  farms  that 
had  smaller  incomes.1  Considering  the  improved  crop  yields  on  the 
nineteen  farms  an  actual  decline  in  the  loss  of  nitrogen  for  a  given 
amount  of  produce  is  shown  at  the  end,  as  compared  with  the  begin- 
ning of  the  seven-year  period.  This  is  of  special  importance  to  the 
public  and  to  landowners  who  expect  to  pass  their  land  on  to  their 
children,  and  so  are  concerned  with  the  well-being  of  the  coming 
generation  of  farmers  and  the  future  of  the  agricultural  industry. 

While  it  is  not  the  purpose  of  this  publication  to  go  into  detailed 
analysis  of  farm  organization  problems,  the  statement  that  these  nine- 
teen farms  had  changed  their  practices  calls  for  at  least  an  illustra- 
tion of  some  of  the  changes  made.  Such  an  illustration  is  offered  by 
one  of  the  men  who  had  formerly  sowed  more  than  80  percent  of  his 
crop  land  to  corn  and  oats,  and  had  used  blue  grass  for  a  hog  pasture. 
According  to  his  own  statement,  after  he  began  to  study  his  business 
he  made  the  following  changes:  (1)  he  adopted  a  rotation  of  corn, 
corn,  oats,  wheat  and  mixed  clovers,  with  an  extra  field  for  alfalfa; 
(2)  the  change  in  the  cropping  plan,  together  with  an  increased 
amount  of  live  stock,  provided  labor  for  the  same  number  of  men 
thruout  most  of  the  year;  (3)  after  the  new  rotation  of  crops  was 
established,  he  reduced  the  number  of  work  horses  by  five  and  intro- 
duced a  tractor  to  help  handle  the  peak  load  of  labor  in  preparing 
crop  land  in  the  spring;  (4)  the  alfalfa  pasture  and  the  use  of  a 
self-feeder  enabled  him  to  market  spring  pigs  in  September  before 
the  drop  in  prices;  (5)  the  use  of  limestone  and  phosphate,  together 
with  the  new  rotation  of  crops,  increased  the  yields  of  corn  15  to  20 
bushels  to  the  acre,  and  other  yields  were  correspondingly  good.  In 
this  case  the  farmer  had  increased  his  crop  yields,  had  changed  his 
method  of  handling  hogs  so  that  the  enterprise  was  more  profitable, 


1  The  actual  loss  of  nitrogen  on  the  nineteen  farms  in  1922  was  27.2  pounds 
per  acre,  which  was  1.8  pounds  per  acre  greater  than  the  loss  in  1916  (see 
Table  1).  However,  the  average  crop  yields  in  1922  were  13.7  points  higher  than 
in  1916  (Table  10,  line  50).  Hence,  as  compared  to  the  total  crops  produced,  the 
actual  loss  of  nitrogen  had  been  reduced  on  these  nineteen  farms.  The  loss  of 
nitrogen  on  the  other  farms  apparently  increased  out  of  proportion  to  the  slight 
increases  in  crop  yields,  for  they  showed  an  increase  of  only  4  percent  in  crop 
yields  and  incurred  an  additional  loss  of  4.5  pounds  of  nitrogen  per  acre. 


1984]  INCREASING  FARM  EARNINGS  155 

and  was  making  better  use  of  his  man  and  horse  labor.  The  advant- 
ages gained  by  these  changes  resulted  in  greatly  reduced  expenses  in 
proportion  to  the  farm  income. 

Altho  the  earnings  of  the  nineteen  farms  are  shown  to  have  been 
well  above  the  average  of  all  the  other  farms  studied,  there  was  a 
wide  difference  in  the  earnings  on  the  nineteen  farms.  The  re- 
mainder of  this  bulletin  will  show  how  certain  factors  were  respon- 
sible for  these  differences. 


THE  EFFECT  ON  FAKM  EARNINGS  OF  GOOD  AND  POOR 
FARM  ORGANIZATION  AND  MANAGEMENT 

The  seven  best  paying  farms  of  the  nineteen  on  which  seven- 
year  records  were  kept  earned  an  average  yearly  rate  of  8.80  percent 
on  the  investment  during  the  seven-year  period.  The  seven  poorest 
paying  farms  earned  only  4.28  percent,  or  4.52  percent  less  on  the 
investment  than  the  seven  best  paying  farms.  The  rate  earned  on 
the  investment  is  the  percentage  which  the  net  annual  income  from 
the  investment  is  of  the  total  capital  invested  in  the  farm  business; 
it  represents  the  return  to  the  operator  for  the  use  of  his  capital  and 
his  managing  ability. 

Another  measure  of  profits  in  farming  is  the  labor  and  manage- 
ment wage,  which  is  the  money  the  operator  of  the  farm  makes  above 
all  expenses  and  5  percent  interest  on  the  capital  invested,  as  pay  for 
his  own  labor  and  management  ability.  The  average  annual  labor 
and  management  wage  was  $2,153  greater  on  the  seven  best  paying 
farms  than  on  the  seven  poorest  paying  farms. 

That  these  differences  in  farm  earnings  were  due  mainly  to  differ- 
ences in  managing  skill  is  indicated  by  a  study  of  some  of  the  separate 
factors  affecting  the  efficiency  of  the  nineteen  farms.  The  more  im- 
portant differences  between  the  highest  and  the  lowest  paying  farms 
are  shown  in  Table  2,  and  are  further  explained  below : 

(1)  The  crop  index  on  the  seven  farms  earning  the  highest  rate  on 
the  investment  was  127.5,  as  compared  to  123.1  on  the  seven  poorest 
paying  farms.    This  is  a  difference  of  4.4  points  in  favor  of  the  seven 
best  paying  farms.     (The  crop  index  as  used  here  is  the  percentage 
which  the  average  yield  of  corn,  oats,  and  wheat  on  the  farms  studied 
was  of  the  average  yields  of  corn,  oats,  and  wheat  in  the  county, 
taking  into  consideration  the  acreage  of  the  crops  grown.) 

(2)  The  average  returns  from  $100  invested  in  productive  live 
stock  amounted  to  $138.15  on  the  seven  best  paying  farms  and  only 
$77.16,  or  $60.99  less,  on  the  seven  poorest  paying  farms.     (By  pro- 
ductive live  stock  is  meant  all  live  stock  except  horses  and  mules. 
This  is  a  general  measure  of  the  efficiency  of  the  live-stock  enterprise 
as  a  whole.     A  more  complete  analysis  of  the  live-stock  enterprises 


156  BULLETIN  No.  252 


5tv«n  farms  which 

earned 

rates 


Seven  I&rrri5  which 
earned  lowest 
rates 


FIG.  2. — THE  SEVEN  BEST  PAYING  FARMS  EARNED  4.52  PERCENT  MORE  ON  THE 

INVESTMENT  THAN  THE  SEVEN  LOWEST  PAYING  FARMS 
These  differences  in  farm  earnings  were  due  mainly  to  managing  skill.    Some 
of  the  more  important  factors  affecting  the  efficiency  of  the  farms  are  listed  in 
Table  2,  and  are  briefly  discussed  in  this  section. 

can  be  made  readily  by  studying  the  returns  for  each  $100  invested 
in  each  class  of  live  stock.) 

(3)  The  crop  acres  worked  per  man  on  the  seven  best  paying 
farms  averaged  89.1  acres  for  the  seven-year  period,  while  on  the 
seven  poorest  paying  farms  only  79.4  crop  acres  were  worked  per  man. 
(The  crop  acres  worked  per  man  is  the  total  number  of  acres  in 
harvested  crops  handled  per  man,  excluding  all  permanent  pastures 
but  including  annual  pastures  such  as  oats  and  rape,  which  require 
considerable  labor  each  year  for  seeding.) 

(4)  The  crop  acres  worked  per  horse  averaged  20.5  acres  on  the 
seven  best  paying  farms  even  tho  tractors  were  used  only  12.2  percent 
of  the  time,  as  compared  with  20.4  acres  per  horse  on  the  seven  less 
profitable  farms,  where  tractors  were  used  57.1  percent  of  the  time. 
(The  crop  acres  worked  per  horse1  are  determined  in  the  same  way 
as  the  crop  acres  worked  per  man.) 

(5)  The  expenses  incurred  for  each  $100  of  gross  income  averaged 
$31.98  on  the  seven  best  paying  farms,  while  on  the  seven  poorest 
paying  farms  it  amounted  to  $52.68,  or  $20.70  more.2    These  expenses 

aln  this  bulletin,  the  term  crop  acres  worked  per  horse  disregards  the  use  of 
the  tractor.  However  the  proportion  of  the  seven-year  period  that  a  tractor  was 
included  as  part  of  the  farm  equipment  is  shown  in  each  of  the  tables.  Crop 
acres  worked  per  horse  is  a  desirable  measure  for  comparing  the  operating  effi- 
ciency of  different  farms  when  a  comparison  of  the  crop  yields  of  the  farms  can 
also  be  made  and  when  no  tractors  are  used;  or  it  serves  as  a  good  measure  of 
operating  efficiency  when  all  farms  in  the  group  are  using  tractors.  When  tractors 
are  used  to  provide  part  of  the  farm  power  on  part  of  the  farms  it  is  necessay 
to  recognize  that  fact  when  studying  the  use  of  labor.  When  a  comparison  of 
tractor  and  non-tractor  farms  is  to  be  made,  the  average-sized  corn  belt  farms 
having  tractors  should,  on  the  average,  show  from  5  to  10  crop  acres  more  worked 
per  horse  than  the  non-tractor  farms.  Since  few  tractors  were  used  on  these  farms 
when  the  study  was  begun,  no  attempt  is  made  in  this  publication  to  study  the 
place  of  the  tractor  on  the  farms. 

'While  this  measure  of  farm  efficiency  has  not  been  used  generally  in  farm 
management  studies,  it  does  provide  a  means  of  emphasizing  the  importance  of 
keeping  operating  expenses  low  in  relation  to  the  gross  income. 


1984] 


INCREASING  FARM  EARNINGS 


157 


TABLE  2. — A  COMPARISON  OF  THE  SEVEN  HIGHEST  AND  THE  SEVEN  LOWEST  PAYING 
OP  THE  NINETEEN  FARMS  THAT  KEPT  RECORDS  CONTINU- 
OUSLY FOR  SEVEN  YEARS 


(GROUP  1) 
Average  of  7 
farms  earning 
highest  rates 

(GROUP  2) 
Average  of  7 
farms  earning 
lowest  rates 

Difference 
between  the 
two  groups 

Rate  earned  on  investment  

8.80% 

4.28% 

4.52% 

Labor  and  management  wage  .... 

$2,211.00 

$  58.00 

$2,153.00 

1.  Crop  index  

127.5 

123.1 

4.4 

2.  Returns  from  $100  invested  in 
productive  live  stock  

$    138  15 

$  77  16 

$     60  99 

Percent  of  income  from  all  live 
stock  

50.8% 

45.9% 

4.9% 

3.  Crop  acres  worked  per  man.  .  . 
4.  Crop  acres  worked  per  horse  .  . 
Percent  of  years  with  tractors  . 
5.  Expense  per  $100  gross  income 

89.1 
20.5 
12.2% 
$     31.98 

79.4 
20.4 
57.1% 
$  52.68 

9.7 
.1 
-44.9% 
$  -20.70 

Investment  per  acre  

$    278  00 

$279  00 

$    -1.00 

Net  income  per  acre  

$     24  47 

$  11  94 

$      12.53 

Size  of  farm,  acres  

162.8 

211.1 

-48.3 

NOTE. — Group  1  includes  Farms  1,  2,  3,  4,  5,  6,  and  7;  Group  2  includes  Farms 
13,  14,  15,  16,  17,  18,  and  19.  Each  group  is  an  average  of  the  records  of  seven 
farms  over  a  period  of  seven  years,  or  an  average  of  49  annual  farm  records.  De- 
tailed information  concerning  the  results  on  each  farm  are  shown  in  Table  9,  pages 
174  to  177. 

include  all  cash,  operating  expenses,  the  value  of  the  operator's  own 
labor  and  the  labor  of  members  of  his  family,  and  the  depreciation 
on  all  farm  equipment,  including  buildings.  They  do  not  include 
feed  purchased,  feed  fed  to  work  horses,  or  any  charge  for  the  use 
of  land  and  capital. 

The  influence  of  these  five  factors  on  farm  earnings  will  be  shown 
further  by  selecting  the  seven  farms  ranking  highest  in  each  factor 
and  the  seven  farms  ranking  lowest  and  comparing  the  success  of  the 
two  groups.  Cost  accounting  investigations,  as  well  as  other  studies 
of  farm  earnings  made  in  Illinois  and  other  states,  indicate  that  these 
are  important  measures  of  relative  managerial  ability.  Additional 
measures  of  the  efficiency  of  farms  are  suggested  on  pages  172  and  173. 


THE  EFFECT  ON  FARM  EARNINGS  OF  GOOD  AND 
POOR  CROP  YIELDS 

While  extremely  high  crop  yields  are  not  necessarily  an  indication 
of  profitable  farming,  it  is  generally  recognized  that  good  crop  yields 
are  essential  to  the  best  net  returns  in  farming.  We  find  in  this  study 
that  the  seven  farms  which  secured  the  highest  crop  yields  earned 
7.09  percent  on  the  total  farm  investment,  while  the  seven  farms  with 


158  BULLETIN  No.  252  [June, 

the  lowest  crop  yields  earned  5.73  percent,  a  difference  of  1.36  percent 
in  favor  of  the  group  having  the  highest  crop  yields  (Fig.  3  and 
Table  3).  The  difference  in  the  labor  and  management  wage  on  the 
two  groups  of  farms  was  $532  in  favor  of  the  farms  with  the  largest 
crop  yields.  The  crop  index  shows  that  the  yields  on  the  seven  highest 
yielding  farms  were  33.8  percent  larger  than  the  county  average, 
while  the  seven  lowest  yielding  farms  had  yields  15.8  percent  larger 
than  the  county  average,  a  difference  of  18  percent  of  the  average 
county  yields  in  favor  of  the  higher  yielding  farms. 

A  further  study  of  Table  3  will  show  that  the  seven  farms  with 
the  best  crop  yields  were  as  an  average  better  in  the  returns  per  $100 
invested  in  productive  live  stock,  in  the  crop  acres  worked  per  man, 
and  in  the  expense  per  $100  gross  income,  than  the  farms  with  lowest 
crop  yields.  The  farms  with  the  lower  yields  showed  a  larger  number 
of  crop  acres  worked  per  horse,  but  this  was  probably  due  to  the  fact 
that  tractors  were  used  more  of  the  time  on  these  farms.  Of  the 
seven  farms  with  the  highest  crop  yields,  five  were  among  the  seven 
best  paying  farms,  as  shown  in  Table  2. 

While  all  the  difference  in  farm  earnings  between  the  two  groups 
of  farms  cannot  be  attributed  to  the  difference  in  crop  yields,  it  is 
evident  that  good  crop  yields  are  an  important  factor  in  making  the 
farm  pay.  By  referring  back  to  Table  2,  it  will  be  noted  that  the 
crop  index  on  the  seven  farms  making  the  highest  rate  on  the  invest- 
ment was  larger  than  the  crop  index  on  the  seven  lowest  paying  farms 
by  4.4  percent. 

Crop      Bxrt«- 
Index        earned 


Seven  farms  with          .  -,  ,r  :  ,  ^^-i.         1 33  ft 

highest  crop  -  "  "       -  709% 

yields 


Jeven  farms  with    j  ,--•-•  .--    .  II 5  ft 

lowest  crop  •**  573% 

yields 


FIG.  3. — THE  IMPORTANCE  OF  GOOD  CROP  YIELDS  IN  MAKING  THE  FARM  PAY 

Of  the  nineteen  farms  the  seven  making  the  biggest  crop  yields  earned  an 
average  of  1.36  percent  more  on  the  total  farm  investment  than  did  those  which 
had  the  smallest  crop  yields. 


NOTE. — Thruout  this  bulletin  the  method  used  for  analyzing  the  effect  of  a 
given  factor  on  farm  earnings  is  to  compare  the  seven  farms  ranking  highest  in 
respect  to  that  factor  with  the  seven  farms  ranking  lowest  in  respect  to  the  same 
factor.  The  reader  should  note  that  the  farms  are  regrouped  in  studying  each 
factor  and  that  the  same  seven  farms  do  not  occur  in  any  two  groups.  Seven 
farms  were  selected  in  order  to  have  about  one-third  of  the  farms  in  the  upper 
group  and  one-third  in  the  lower  group.  This  eliminated  a  few  farms  between  the 
two  groups  which  were  only  slightly  different  from  farms  in  both  the  upper  and 
the  lower  groups.  The  footnotes  under  Table  2,  3,  4,  5,  6,  and  7  indicate  which 
farms  are  included  in  the  groups  represented  in  the  table. 


1924} 


INCREASING  FARM  EARNINGS 


159 


The  importance  of  crop  yields  is  again  shown  in  the  study  of  indi- 
vidual farms.  Farm  2,  which  produced  the  best  yields  for  the  seven- 
year  period  of  any  of  the  nineteen  farms,  earned  the  highest  labor 
and  management  wage  and  next  to  the  highest  return  on  the  invest- 
ment of  any  of  the  nineteen  farms.  Farm  19,  which  produced  the 
lowest  yields,  earned  the  lowest  rate  on  the  investment  and  had  the 
lowest  labor  and  management  wage.  (Table  9,  line  50.  For  all  ref- 
erences to  individual  farms,  see  this  table,  on  pages  174-177.) 

Also  a  study  of  Table  11  (lines  44,  46,  and  48)  will  show  that  in 
1922,  in  several  counties  of  the  state,  the  farms  which  earned  the  best 
rates  on  the  investment  produced,  in  general,  higher  yields  of  all 
crops  than  did  the  farms  which  earned  the  lowest  rates  on  the  invest- 
ments. In  several  cases  the  benefit  of  good  crop  yields  was  over- 
balanced by  inefficiency  in  other  parts  of  the  farm  business.  For 
example,  on  Farms  14  and  18  the  benefits  from  good  crop  yields  were 
lost  to  the  operators  because  of  poor  returns  from  live  stock,  to  which 
part  of  the  crops  were  fed;  because  of  high  expenses  in  proportion 
to  receipts ;  and  because  man  and  horse  labor  were  not  used  efficiently. 
Other  inefficient  management  may  also  have  been  in  part  responsible. 
On  the  other  hand,  Farms  1  and  3,  which  were  two  of  the  most  profit- 
able farms  for  the  seven-year  period,  were  among  the  five  farms  rank- 
ing lowest  in  crop  yields.  However,  both  of  these  farms  were  better 

TABLE  3. — THE  SEVEN  FAKMS  HAVING  THE  HIGHEST  CROP  YIELDS  COMPARED 
WITH  THE  SEVEN  FARMS  HAVING  THE  LOWEST  CROP  YIELDS 


(GROUP  1) 
Average  of  7 
farms  with 
highest  crop 
yields 

(GROUP  2) 
Average  of  7 
farms  with 
lowest  crop 
yields 

Difference 
between  the 
two  groups 

Rate  earned  on  investment  

7.09% 

5.73% 

1  36% 

Labor  and  management  wage  .... 

$1,463.00 

$931.00 

$532.00 

1.  Crop  index    

133.8 

115.8 

18  0 

2.  Returns  from  $100  invested  in 
productive  live  stock  

$    123  50 

$  98.08 

$  25  42 

Percent  of  income  from  all  live 
stock.  

56.1% 

38.2% 

17  9% 

3.  Crop  acres  worked  per  man.  .  . 
4.  Crop  acres  worked  per  horse  .  . 
Percent  of  years  with  tractors. 
5.  Expense  per  $100  gross  income  . 

82.6 
19.0 

8.2% 
$     38.36 

80.2 
21.0 
34.7% 
$  43.84 

2.4 
-2.0 
-26.5% 
$-4.59 

Investment  per  acre  

$    297.00 

$281  .  00 

$  16  00 

Net  income  per  acre    

$      21  .  07 

"*  $  16.12 

$     4  95 

Size  of  farm,  acres  

160.0 

•>      214.6 

-54.6 

NOTE. — Group  1  includes  Farms  2,  7, 18,  14,  4,  5,  and  6;  Group  2  includes  Farms 
19,  12,  3,  8,  16,  15,  and  11.  While  Farm  1  had  a  lower  crop  index  than  Farms  16, 
15,  and  11,  it  was  left  out  of  this  group  because  it  is  on  the  yellow-gray  silt  loam 
type  of  soil,  while  the  other  farms  are  on  brown  silt  loam  and  black  clay  loam, 
which  are  naturally  much  more  productive  types  of  soil. 


160  BULLETIN  No.  252  [June, 

than  the  average  in  the  returns  from  live  stock,  in  the  use  of  man  and 
horse  labor,  and  in  low  expenses  in  proportion  to  receipts.  Also,  it 
may  well  be  noted  that  Farms  3,  8,  11,  and  12,  which  ranked  low  in 
crop  yields,  do  not  appear  in  the  group  showing  the  lowest  rate 
earned.  (Table  9,  lines  50,  52,  39,  40,  and  37.) 

The  conclusion  from  a  study  of  all  these  data  relating  to  crop 
yields,  as  well  as  the  conclusion  of  farmers  after  long  years  of  experi- 
ence, is  that  good  crop  yields  are  essential  for  the  best  net  returns  from 
the  capital  invested,  but  that  good  yields  must  be  secured  at  a  reason- 
able cost,  including  man  labor,  horse  labor,  and  other  items.  When 
crops  are  fed  on  the  farm,  profits  from  good  yields  are  not  finally 
realized  unless  the  live  stock  is  well  handled  and  is  of  a  quality  which 
makes  good  use  of  feed. 

While  crop  yields  are  treated  as  a  single  factor  in  this  discussion, 
it  will  be  recognized  that  good  crop  yields  are  the  result  of  many 
different  factors,  among  which  the  following  are  highly  important: 
the  rotation  of  crops,  including  the  growing  of  deep-rooted  legumes; 
the  careful  use  of  all  manure;  the  use  of  limestone  and  phosphate 
where  needed;  the  thoro  drainage  of  all  wet  land;  the  use  of  good 
seeds  of  proved  high-yielding  and  good  quality  strains,  and  the  treat- 
ment of  such  seed  for  smut  or  the  testing  of  it  for  disease ;  the  inocu- 
lation of  legumes  where  the  soil  is  not  already  inoculated;  the  use 
of  good  tillage  methods ;  the  planting  of  seed  at  the  right  time ;  and 
avoiding  or  combating  diseases  and  insects  with  the  most  approved 
methods. 

Increased  crop  yields  resulting  from  improved  farm  practices  do 
not  necessarily  mean  producing  more  grain  per  farm.  However, 
changes  in  practice  may  reduce  the  cost  of  production  and  in  this  way 
increase  the  profit  from  the  farm  as  a  whole.  A  better  rotation  of 
crops,  including  legumes,  would  decrease  the  grain  acreage  on  many 
Illinois  farms  but  would  increase  the  acre  yield  of  land  left  in  crops. 

THE  EFFECT  ON  FARM  EARNINGS  OF  GOOD  AND 
POOR  USE  OF  LIVE  STOCK 

Practically  all  the  nineteen  farms  had  well-bred  live  stock,  but 
the  returns  which  the  different  farmers  received  from  this  source 
were  not  in  proportion  to  their  investments  in  live  stock.  The  seven 
farms  showing  the  highest  returns  from  $100  invested  in  productive 
live  stock  (Group  1)  earned  7.95  percent  on  the  total  farm  invest- 
ment, compared  with  4.96  percent  earned  by  the  seven  farms  showing 
the  lowest  returns  (Group  2).  This  was  a  difference  of  2.99  percent 
in  favor  of  the  farms  in  Group  1.  The  difference  in  the  labor  and 
management  wage  was  $1,530  in  favor  of  the  farms  in  Group  1. 
(See  Fig.  4  and  Table  4.) 


INCREASING  FARM  EARNINGS 


161 


vjevcnforms  which 
nwdt  hicjhtst  returns 
from  live  stock 


5cv«.n  farms  which 
made  lowest  returns 
from  live,  stock. 


(Returns     Rate 
pc,r$iOO     earned 
invested 
$147-34. 

7.95% 


$66.42 


4.96% 


FIG.  4. — SUCCESS  IN  FARMING  Is  ASSOCIATED  WITH  THE  SUCCESS  OF  THE  LIVE- 
STOCK ENTERPRISES 

The  seven  farms  with  the  best  live-stock  returns  earned  3  percent  more  on 
the  total  farm  investment  than  the  seven  with  the  lowest  returns  from  live  stock. 

The  farms  of  Group  1,  making  the  best  returns  for  each  $100  in- 
vested in  productive  live  stock,  received  a  return  of  $147.34,  as  com- 
pared with  a  return  of  $66.42  from  the  farms  in  Group  2,  a  differ- 
ence of  $80.92  in  favor  of  the  farms  in  Group  1.  Of  the  seven  farms 
with  the  best  returns  from  each  $100  invested  in  productive  live  stock, 
five  of  the  farms  were  also  among  the  seven  best  paying  farms  shown 
in  Table  2.  It  will  be  noted  that  the  men  who  received  the  highest 
returns  from  live  stock  had  better  crop  yields,  worked  more  crop  acres 
per  man  and  per  horse,  and  had  lower  expense  per  $100  gross  income 
than  the  men  who  received  the  lowest  returns  from  live  stock. 


TABLE  4. — THE  SEVEN  FARMS  MAKING  THE  BEST  RETURNS  FROM  PRODUCTIVE 
LIVE  STOCK  COMPARED  WITH  THE  SEVEN  FARMS  MAKING  THE  LOWEST  RETURNS 


(GROUP  1) 
Average  of  7 
farms  making 
best  returns 
from  productive 
live  stock 

(GROUP  2) 
Average  of  7 
farms  making 
lowest  returns 
from  productive 
live  stock 

Difference 
between  the 
two  groups 

Rate  earned  on  investment  

7.95% 
$2,018  00 

4.96% 
$488  00 

2.99% 
$1,530.00 

Labor  and  management  wage  .... 

1.  Crop  index  

123.0 
$   147.34 

53.5% 
92.7 
21.6 

28.6% 
$     34.94 

121.6 
$  66.42 

31.3% 
79.1 
19.6 

40.8% 
$  45  64 

1.4 
$     80.92 

22.2% 
13.6 
2.0 
-12.2% 
$-10.70 

2.  Returns  from  $100  invested  in 
productive  live  stock  

Percent  of  income  from  all  live 
stock  

3.  Crop  acres  worked  per  man.  .  . 
4.  Crop  acres  worked  per  horse  .  . 
Percent  of  years  with  tractor.  .  . 
5.  Expense  per  $100  gross  income 

Investment  per  acre  

$   272.00 
$     21.65 
191.4 

$273  .  00 
$  13.57 
216.1 

$    -1.00 
$       8.08 
-24  7 

Net  income  per  acre  

Size  of  farm,  acres  

NOTE. — Group  1  includes  Farms  2,  4, 11,  5, 1,  3,  and  16;  Group  2  includes  Farms 
19,  9,  14,  17,  10,  13,  and  12. 


162  BULLETIN  No.  252  [June, 

The  importance  of  productive  live  stock  as  a  factor  affecting  farm 
profits  is  shown  again  in  Table  2.  The  seven  farms  making  the  highest 
returns  on  the  total  farm  investment  received  an  average  of  $138.15 
for  each  $100  invested  in  productive  live  stock,  compared  with  $77.16 
received  by  the  seven  farms  which  earned  the  lowest  returns  on  the 
total  farm  investment. 

The  importance  of  productive  live  stock  is  shown  again  in  the 
study  of  individual  farm  records.  Farm  2,  which  made  the  best  labor 
and  management  wage  for  the  seven-year  period  and  earned  next  to 
the  best  rate  on  the  total  farm  investment  of  any  of  the  nineteen 
farms,  showed  the  best  average  returns  for  each  $100  invested  in  pro- 
ductive live  stock.  On  the  other  hand,  Farm  19,  which  made  the  lowest 
annual  labor  and  management  wage  and  the  lowest  rate  on  the  total 
farm  investment,  showed  the  lowest  returns  for  each  $100  invested  in 
productive  live  stock.  (See  Table  9,  line  52.) 

Also  a  study  of  Table  11,  line  51,  will  show  that  in  1922  in  several 
counties  of  the  state  farms  which  made  the  best  rate  on  the  total  farm 
investment  invariably  made  good  returns  on  the  money  invested  in 
productive  live  stock. 

It  should  be  noted  that  the  seven  farms  with  the  highest  earnings, 
shown  in  Table  2,  and  the  seven  farms  with  the  best  returns  for  each 
$100  invested  in  productive  live  stock,  shown  in  Table  4,  had  more  live 
stock  than  their  less  successful  neighbors.  This  is  explained  in  part 
by  the  fact  that  all  farms  have  considerable  cheap  feed  which  can  be 
marketed  profitably  only  when  sold  in  the  form  of  live  stock  and  live- 
stock products.  Sufficient  live  stock  is  needed  on  all  farms  to  provide 
a  means  of  marketing  such  feeds  to  advantage. 

As  in  the  case  of  crop  yields,  the  measure  of  live-stock  returns  is 
treated  as  a  single  factor  in  this  discussion.  It  is  recognized,  of  course, 
that  profits  from  live  stock  are  dependent  upon  many  factors,  among 
which  the  following  are  highly  important ;  the  wise  selection  of  feeds ; 
the  efficient  use  of  roughages  and  unmarketable  grain;  the  home 

Bate 
earned 


FIG.  5. — EFFICIENT  USE  OF  MAN  LABOR  is  AN  ESSENTIAL  PART  OF  GOOD  FARM 

MANAGEMENT 

The  seven  farms  working  the  most  crop  acres  per  man  worked  22  acres  more 
per  man  and  earned  2.07  percent  more  on  the  total  farm  investment  than  the 
seven  working  the  fewest  crop  acres. 


1924} 


INCREASING  FARM  EARNINGS 


163 


production  of  legume  forage  and  the  careful  purchase  of  needed  sup- 
plemental feeds;  careful  management  in  relation  to  sanitation;  the 
selection  of  live  stock  which  will  efficiently  produce  the  quality  of 
live  stock  and  live-stock  products  which  the  consumer  wants ;  and  the 
marketing  of  live  stock  and  live-stock  products  at  the  seasons  of  most 
favorable  price. 

THE  EFFECT  ON  FARM  EARNINGS  OF  THE  NUMBER 
OF  CROP  ACRES  WORKED  PER  MAN 

The  more  successful  farmers  usually  work  a  large  number  of  crop 
acres  per  man  without  reducing  the  yield  of  crops,  and  at  the  same 
time  they  produce  more  live  stock  per  man  than  less  successful  farmers. 
In  this  study,  the  seven  farms  that  worked  the  most  crop  acres  per 
man  (Group  1;  94.1  acres)  earned  7.62  percent  on  the  total  farm 
investment,  while  the  seven  farms  that  worked  the  fewest  crop  acres 
per  man  (Group  2;  72.1  acres)  earned  5.55  percent  on  the  total  in- 
vestment. This  is  a  difference  in  favor  of  the  farms  of  Group  1  of 
2.07  percent  on  the  total  farm  investment  and  of  22  acres  of  crops 
worked  per  man.  (These  facts  are  further  shown  in  Fig.  5  and 
Table  5.)  The  labor  and  management  wage  on  the  two  groups  of 
farms  was  $1,202  in  favor  of  the  farms  in  Group  1,  the  farms  working 
the  most  crop  acres  per  man. 


TABLE  5. — THE  SEVEN  FARMS  WORKING  THE  MOST  CROP  ACRES  PER  MAN  COM- 
PARED WITH  THE  SEVEN  FARMS  WORKING  THE  FEWEST 


(GROUP  1) 
Average  of  7 
farms  which 
worked  most 
crop  acres 
per  man 

(GROUP  2) 
Average  of  7 
farms  which 
worked  fewest 
crop  acres 
per  man 

Difference 
between  the 
two  groups 

Rate  earned  on  investment  

7.62% 

5.55% 

2.07% 

Labor  and  management  wage  .... 

$1,962.00 

$760.00 

$1,202.00 

1.  Crop  index  

122.6 

125.9 

-3.3 

2.  Returns  from  $100  invested  in 
productive  live  stock  

$   139  94 

$  86.57 

$     53.37 

Percent  of  income  from  all  live 
stock  

48.0% 

38.4% 

9.6% 

3.  Crop  acres  worked  per  man  .  .  . 
4.  Crop  acre  worked  per  horse  .  .  . 
Percent  of  years  with  tractors 
5.  Expense  per  $100  gross  income 

94.1 
22.1 

40.8% 
$     35  .  51 

72.1 
20.2 
40.8% 
$  46.66 

22  0 

1.9 
0.0% 
$  -11.15 

Investment  per  acre  

$   268.00 

$291.00 

$-23.00 

Net  income  per  acre  

$     20.45 

$  16.15 

$       4.30 

Size  of  farm,  acres  

210.4 

180.2 

30.2 

NOTE. — Group  1  includes  Farms  1,2,  5,  10, 16,  11,  and  3;  Group  2  includes  Farms 
12,  18,  15,  6,  13,  7,  and  14. 


164  BULLETIN  No.  252  [June, 

A  study  of  Table  5  further  emphasizes  the  importance  of  the 
efficient  use  of  man  labor.  While  the  crop  yields  were  slightly  higher 
on  the  seven  farms  working  the  fewest  crop  acres  per  man,  it  will  be 
noted  that  the  returns  for  each  $100  invested  in  productive  live 
stock,  the  crop  acres  worked  per  horse,  and  the  expenses  for  each  $100 
of  gross  income  are  in  favor  of  the  farms  working  the  most  crop  acres 
per  man.  Four  of  the  seven  farms  ranking  highest  in  this  factor  are 
also  to  be  found  among  the  seven  best  paying  farms,  as  is  shown  in 
Table  2. 

As  in  the  case  of  factors  previously  discussed,  all  the  difference 
between  the  two  groups  of  farms  cannot  be  attributed  to  the  difference 
in  the  number  of  crop  acres  worked  per  man.  However,  it  is  evident 
that  this  factor  is  one  of  the  important  ones  influencing  farm  earnings. 
The  farms  shown  in  Table  2  as  earning  the  highest  rate  on  the  total 
farm  investment  worked  9.7  acres  more  per  man  than  the  seven  farms 
earning  the  lowest  rate  on  the  investment. 

The  importance  of  using  man  labor  efficiently  is  shown  again  in 
the  study  of  individual  farms.  Farms  1  and  2,  which  made  the  best 
net  profits  for  the  seven-year  period,  as  indicated  by  the  rate  earned 
on  the  total  investment  and  also  by  the  labor  and  management  wage, 
worked  more  crop  acres  per  man  than  any  of  the  other  nineteen  farms 
(Table  9,  line  39). 

While  the  efficient  use  of  man  labor  is  one  of  the  essential  factors 
of  good  farm  management,  a  large  acreage  of  crops  worked  per  man 
is  not  necessarily  an  indication  of  efficient  work,  since  the  handling 
of  a  large  acreage  may  be  made  possible  by  less  careful  work.  For 
example  it  will  be  noted  in  Table  9,  line  39,  that  Farms  16  and  19 
worked  more  than  the  average  number  of  crop  acres  per  man,  but  the 
crop  yields  on  those  farms  were  considerably  below  the  average  yields 
for  the  entire  group  of  farms.  The  land  on  Farms  16  and  19  was 
naturally  as  productive  as  that  on  most  of  the  other  farms ;  which  fact 
leads  to  the  conclusion  that  the  work  on  crops  was  not  handled  in  the 
most  efficient  way. 

The  efficient  use  of  man  labor  is  accomplished  thru  giving  attention 
to  a  number  of  factors,  among  which  the  following  are  important: 
the  adoption  of  a  rotation  of  crops  which  will  give  a  good  distribution 
of  man  labor  thruout  the  growing  season;  the  feeding  off  of  crops 
to  live  stock  (about  10  percent  of  the  corn  crop  on  these  farms  was 
so  used)  ;  the  combining  of  live-stock  and  crop  production  so  as  to 
utilize  labor  more  evenly  thruout  the  year ;  arranging  farm  operations 
to  utilize  rainy  days  and  slack  periods  for  repairing  and  odd  jobs  so 
that  such  work  will  not  interfere  with  the  field  work;  and  carefully 
arranging  the  fields  and  farmstead  to  facilitate  the  carrying  out  of 
farm  operations  with  the  least  effort. 


19M\  INCREASING  FARM  EARNINGS  165 

THE  EFFECT  ON  FARM  EARNINGS  OF  THE  NUMBER 
OF  CROP  ACRES  WORKED  PER  HORSE 

The  cost  of  horse  labor  frequently  exceeds  the  cost  of  man  labor 
in  crop  production.  This  is  not  generally  realized,  since  a  large  part 
of  the  cost  of  horse  labor  is  represented  in  the  feed  which  is  produced 
on  the  farm  but  which  would  add  to  the  income  if  sold  or  fed  to  other 
classes  of  live  stock. 

The  seven  farms  in  Group  1  of  Table  6,  which  worked  the  most 
crop  acres  per  horse  (24.6  acres)  during  the  seven-year  period,  earned 
6.97  percent  on  the  total  farm  investment ;  while  the  seven  farms  in 
Group  2,  which  worked  the  fewest  crop  acres  per  horse  (18.6  acres), 
earned  5.28  percent  on  the  investment.  This  is  a  difference  in  favor 
of  Group  1  of  1.69  percent  in  the  rate  earned  on  the  investment  and 
of  six  acres  in  crop  area  worked  per  horse.  The  difference  in  the 
labor  and  management  wage  on  the  two  groups  of  farms  was  $977 
in  favor  of  the  farms  working  the  most  crop  acres  per  horse. 

The  reader  is  warned  that  Table  6  cannot  be  used  to  judge  the 
relative  merits  of  horse  and  tractor  power.  The  fact  that  both  horses 
and  tractors  were  used  on  these  farms,  and  that  tractors  were  added, 
in  several  instances,  during  the  seven-year  period,  prevents  making 
.as  satisfactory  an  analysis  of  the  use  of  horse  labor  as  can  be  made 
in  case  of  the  other  factors.  On  farms  using  only  horses,  or  on  farms 
where  tractors  of  comparable  size  are  used  together  with  horses,  the 
crop  acres  worked  per  horse  serve  as  a  good  measure  of  the  efficient 
use  of  horse  labor. 

There  is  sufficient  difference  in  the  total  earnings  on  the  farms 
working  the  most  crop  acres  per  horse  and  those  working  the  fewest 
to  indicate  the  importance  of  the  efficient  use  of  horse  labor.  The  im- 
portance of  this  factor  is  also  indicated  by  the  fact  that  the  seven 
farms  earning  the  highest  rate  on  the  total  farm  investment  worked 
20.5  acres  per  horse  and  had  tractors  only  12.2  percent  of  the  time, 
while  the  seven  farms  which  earned  the  lowest  rate  on  the  investment 
worked  20.4  acres  of  crops  per  horse  and  in  addition  had  tractors 
57.1  percent  of  the  time,  indicating  that  considerable  more  power  was 
provided  on  the  farms  earning  the  lowest  rate  on  the  investment. 

A  study  of  the  results  on  some  of  the  individual  farms  also  shows 
the  importance  of  working  a  good  acreage  of  crops  per  horse.  For 
example,  Farm  5  worked  the  largest  number  of  crop  acres  per  horse 
of  any  farm  that  did  not  have  a  tractor,  and  was  able  to  secure  crop 
yields  29.7  percent  higher  than  the  average  county  yields;  while  on 
Farm  19,  which  worked  the  lowest  number  of  crop  acres  per  horse 
and  did  not  have  a  tractor,  the  yields  were  only  3.1  percent  higher 
than  the  average  county  yields.  A  study  of  the  other  farms  indicates 


166 


BULLETIN  No.  252 


[June, 


x5even  farms  which 
worked  most  crop 
acres  per  horse, 


Seven  forms  which 
worked  fewest  crop 
ocrcs  p«r  horn. 


Crop  R.Qte 

acres  p«r  earned 
horse 

246  6.97* 


Fia.  6. — A  Low  NUMBER  OF  CROP  ACRES  WORKED  PER  HORSE  USUALLY  MEANS 

HIGH  OPERATING  COSTS 

That  the  cost  of  horse  labor  is  one  of  the  more  important  costs  in  farm 
operations  and  frequently  exceeds  the  cost  of  man  labor  in  crop  production  is  not 
generally  realized.  The  difference  in  the  labor  and  management  wage  on  the  two 
above  groups  of  farms  was  $977  in  favor  of  the  first  group,  as  shown  in  Table  6. 

that  many  farmers  making  efficient  use  of  horse  labor  have  had  crop 
yields  well  above  the  average  of  the  nineteen  farms.  (Table  9,  lines 
40  and  50.) 

It  is  not  generally  appreciated  by  farmers  that  horse  labor  is  one 
of  the  more  important  costs  in  farm  operations.  Cost  accounting  in- 
vestigations show  that  the  average  cost  of  keeping  a  farm  work  horse 


TABLE  6. — THE  SEVEN  FARMS  WORKING  THE  MOST  CROP  ACRES  PER  HORSE  COM- 
PARED WITH  THE  SEVEN  FARMS  WORKING  THE  FEWEST 


(GROUP  1) 
Average  of  7 
farms  which 
worked  most 
crop  acres 
per  horse 

(GROUP  2) 
Average  of  7 
farms  which 
worked  fewest 
crop  acres 
per  horse 

Difference 
between  the 
two  groups 

Rate  earned  on  investment  

6.97% 

5.28% 

1.69% 

Labor  and  management  wage.  .  . 

$1,626.00 

$649.00 

$977.00 

1.  Crop  index  

120.9 

125.9 

-5.0 

2.  Returns  from  $100  invested  in 
productive  live  stock  

$    115.57 

$  89.00 

$  26.57 

Percent  of  income  from  all  live 
stock  

45.2% 

47.0% 

-1.8% 

3.  Crop  acres  worked  per  man.  .  . 
4.  Crop  acres  worked  per  horse  .  . 

Percent  of  years  with  tractors. 
5.  Expense  per  $100  gross  income  . 

85.7 
24.6 

46.9% 
$     40.24 

78.5 
18.6 
38.7% 
$  44.09 

7.2 
6.0 

8.2% 
$-3.85 

Investment  per  acre    

$   278  00 

$278  00 

Net  income  per  acre  

$      19.39 

$  14.84 

$    4.55 

Size  of  farm,  acres  

208.1 

203.3 

4.8 

NOTE. — Group  1  includes  Farms  15,11,  1, 13,  5,  3,  and  6;  Group  2  includes  Farms 
14,  18,  10,  17,  19,  12,  and  2.  In  order  to  make  the  two  groups  of  farms  comparable 
in  regard  to  the  above  factor,  the  seven  farms  in  each  group  include  four  farms  on 
which  tractors  were  used  for  four  to  seven  years  and  three  farms  on  which  no 
tractors  were  used. 


1924]  INCREASING  FARM  EARNINGS  167 

in  central  Illinois  is  about  $100  a  year  under  present  conditions. 
When  a  horse  works  from  16  to  25  acres  of  crops  a  year  and  a  large 
part  of  the  horse  labor  is  spent  on  crop  production,  it  is  apparent 
that  the  cost  of  horse  labor  is  an  important  item  in  growing  crops. 
Hence,  while  too  large  an  acreage  worked  per  horse  leads  to  poor 
quality  of  work,  the  efficient  use  of  horse  labor  is  essential  to  the 
most  profitable  farming.  A  large  acreage  worked  efficiently  per 
horse  is  dependent  upon  the  same  factors  which  were  mentioned  as 
affecting  the  number  of  crop  acres  that  may  be  efficiently  worked  per 
man ;  namely,  a  good  rotation  of  crops ;  the  feeding  off  of  crops  to 
live  stock ;  the  proper  combination  of  live-stock  and  crop  production ; 
utilizing  rainy  days  and  slack  periods  for  movable  work ;  and  a  good 
arrangement  of  fields  and  farmstead. 


IMPORTANCE  OF  THRIFT  IN  FARMING 

A  comparison  of  expenses  with  receipts  serves  as  a  means  of 
emphasizing  the  importance  of  "thrift"  in  farming.  It  is  impossible 
to  determine  the  actual  cost  of  producing  farm  products  from  the 
records  from  which  these  data  were  taken.  However,  the  total  of 
certain  selected  items  of  expense  (including  depreciation  and  repairs 
on  buildings,  machinery,  and  other  equipment,  hired  labor,  family 
labor,  value  of  operator's  labor,  machine  hire,  taxes,  and  miscellaneous 
minor  expenses)  for  each  $100  of  income,  provides  a  means  of  empha- 
sizing the  importance  of  the  relation  between  farm  expenses  and 
receipts.  This  has  not  been  done  adequately  in  any  of  the  comparisons 
previously  made. 

The  seven  farms  which  had  the  lowest  expense  for  each  $100 
of  gross  income  ($31.64)  during  the  seven-year  period,  earned  8.61 
percent  on  the  total  farm  investment,  while  the  seven  farms  with  the 
highest  expense  for  each  $100  of  gross  income  ($52.65)  earned  4.35 
percent.  This  is  a  difference  of  4.26  percent  in  the  rate  earned  on  the 
investment  and  of  $21.01  in  expense  in  favor  of  the  farms  with  the 
lowest  expense.  The  labor  and  management  wage  on  the  two  groups 
of  farms  was  $2,068  in  favor  of  the  farms  with  the  lowest  expense. 

A  further  study  of  Table  7  shows  that  the  seven  farms  which  had 
the  lowest  expense  for  each  $100  of  gross  income  had  better  crop 
yields,  larger  returns  for  each  $100  invested  in  productive  live  stock, 
and  showed  more  efficient  use  of  man  labor,  than  did  the  seven  farms 
with  the  most  expense  for  each  $100  of  gross  income.  The  expense 
per  $100  gross  income  serves  as  an  efficiency  measure  of  the  man- 
agement of  the  entire  farm,  since  the  excellence  of  management 
is  reflected  both  in  the  gross  income  and  in  the  expense  of  opera- 
tion. Of  the  seven  farms  with  the  least  expense  per  $100  gross 


168  BULLETIN  No.  252  [June, 

income,  six  were  among  the  seven  best  paying  of  the  nineteen  farms, 
as  shown  in  Table  2.  Table  2  further  shows  that  the  seven  farms 
which  earned  the  highest  rate  on  the  total  farm  investment  had  an 
expense  of  only  $31.98  for  each  $100  of  gross  income,  while  the  seven 
farms  which  earned  the  lowest  rate  on  the  investment  had  an  expense 
of  $52.68  for  each  $100  of  gross  income. 

The  importance  of  keeping  down  expenses  in  proportion  to  income 
is  shown  again  in  the  study  of  the  records  of  individual  farms.  On 
Farm  2  (Table  9),  which  returned  the  highest  labor  and  manage- 
ment wage,  an  average  of  only  $24.90  was  spent  for  every  $100  received 
during  the  seven-year  period;  while  on  Farm  19,  which  earned  the 
lowest  rate  on  the  total  investment  and  had  the  lowest  labor  and 
management  wage,  $69.23  was  spent  for  every  $100  of  gross  income. 
Farm  3  also  is  a  good  illustration  of  a  farm  that  returned  a  high  rate 
on  the  investment  and  had  a  good  labor  and  management  wage  be- 
cause expenses  were  kept  low.  This  farm  ranked  third  among  the 
nineteen  farms  in  the  rate  earned  on  the  investment  even  tho  it  ranked 
sixth  in  the  returns  from  $100  invested  in  productive  live  stock, 
seventeenth  in  crop  yields,  seventh  in  crop  acres  worked  per  man, 
and  ninth  in  crop  acres  worked  per  horse. 

In  Table  11  is  shown  a  study  of  a  large  number  of  farms  in  three 
different  counties  of  the  state  in  1922.  Line  37  shows  that  the  farms 
which  earned  the  best  rate  on  the  investment  invariably  had  much 
lower  expense  for  each  $100  of  gross  income  than  did  the  farms  which 
earned  the  lowest  rate  on  the  investment. 

Success  in  keeping  expenses  low  in  proportion  to  gross  income  is 
dependent  upon  doing  the  many  things  which  enter  into  the  organiza- 
tion and  operation  of  the  farm  to  make  it  an  efficient  productive  unit. 
Some  expenses  which  will  bear  special  attention  and  means  of  reducing 
them  include:  feed  costs,  which  can  be  reduced  on  many  farms 


p«r$ioo     earned 


5ewn  forms  with 
lowest  expense  per 
income 


.5«vcn  farms  with 
highest  expense  p«r 
$IOOqroSJ  income 


FIG.  7. — WISE  EXPENDITURES  HELP  INSURE  PROFITABLE  FARMING 
The  seven  farms  with  the  lowest  expense  for  each  $100  of  gross  income 
earned  4.26  percent  more  on  the  total  farm  investment  than  the  seven  farms  with 
the  highest  expense.     The  labor  and  management  wage  was  $2,068  greater  per 
farm  in  the  low  expense  group,  as  shown  in  Table  7. 


1924] 


INCREASING  FARM  EARNINGS 


169 


TABLE  7. — THE  SEVEN  FARMS  HAVING  LOWEST  EXPENSE  PER  $100  GROSS  INCOME 
COMPARED  WITH  THE  SEVEN  FARMS  HAVING  THE  HIGHEST  EXPENSE 


(GROUP  1) 
Average  of  7 
farms  with 
lowest  expense 
per  $100  gross 
income 

(GROUP  2) 
Average  of  7 
farms  with 
highest  expense 
per  $100  gross 
income 

Difference 
between  the 
two  groups 

Rate  earned  on  investment  

8  61% 

4.35% 

4.26% 

tabor  and  management  wage  .  .  . 

$2,166.00 

$  98.00 

$2,068.00 

1.  Crop  index     

128  6 

121  1 

7.5 

2.  Returns  from  $100  invested  in 
productive  live  stock  

$    127  50 

$  78.19 

$     49.31 

Percent  of  income  from  all  live 
stock  

39  4% 

46.5% 

-7.1% 

3.  Crop  acres  worked  per  man  .  .  . 
4.  Crop  acres  worked  per  horse  .  . 
Percent  of  years  with  tractors  . 
5.  Expense  per  $100  gross  income 
Gross  income,  per  acre 

87.0 
19.6 
12.2% 
$      31.64 
$      34  11 

74.8 
20.0 
49.0% 
$  52.65 
$  25  91 

12.2 
—  4 

-36^8% 
$  -21.01 

$       8.20 

Investment  per  acre  

$    271.00 

$282.00 

$  -11.00 

Expense  per  acre  

$      10  79 

$  13  64 

$    -2.85 

Net  income  per  acre  

$      33  32 

$  12  27 

$      11.05 

Size  of  farm  acres  

170.6 

210.0 

-39.4 

NOTE. — Group  1  includes  Farms  2,  1,  3,  4,  6,  7,  and  9;  Group  2  includes  Farms 
19,  18,  15,  16,  17,  14,  and  12. 

by  keeping  the  number  of  work  horses  at  the  minimum  required 
for  good  work;  costs  of  harvesting,  storing,  and  marketing  crops, 
which  can  frequently  be  avoided  by  pasturing  off  crops  with  live 
stock;  the  cost  of  feeds  required  for  the  balancing  of  rations,  most 
of  which  can  be  most  economically  produced  on  the  farm;  need- 
less expenditures  for  high-priced  commercial  feeds,  which  can  be 
avoided  by  properly  combining  feeds  grown  on  the  farm;  operation 
costs,  which  can  be  reduced  by  the  careful  selection  of  machinery. 
In  analyzing  individual  farms,  a  study  could  well  be  made  of  such 
separate  items  of  expense  as  labor  and  machinery,  or  equipment,  for 
every  $100  of  gross  income.  Such  a  study  would  help  to  ..locate 
expenses  which  were  higher  than  necessary  for  the  system  of  farming 
practiced. 


WELL-BALANCED  FARMS  ARE  THE  MOST  PROFITABLE 

The  most  profitable  farms  are  well-balanced  farms  which  do  reason- 
ably well  along  most  lines.  This  fact  is  well  illustrated  in  Fig.  8  and 
Table  8,  which  show  the  relative  profitableness  of  the  nineteen  farms 
when  grouped  according  to  the  number  of  important  factors  in  which 
each  farm  was  above  the  average  of  all  nineteen  farms.  This  com- 


170  BULLETIN  No.  252  [June, 

parison  includes  each  of  the  five  factors — crop  yields,  returns  per 
$100  invested  in  productive  live  stock,  crop  acres  worked  per  man, 
crop  acres  worked  per  horse,  and  expense  per  $100  gross  income. 

Of  the  five  farms  which  were  above  the  average  in  four  factors, 
one  was  above  the  average  in  all  five  factors.  As  shown  in  Table  8, 
these  farms  earned  an  average  annual  rate  for  the  seven-year  period 
of  9.31  percent  on  the  total  investment;  or  expressed  in  terms  of 
labor  and  management  wage,  they  returned  an  average  of  $2,465 
annually  to  their  operators. 

The  three  farms  which  were  above  the  average  in  three  factors 
earned  6.63  percent  annually  on  the  investment,  or  a  labor  and  manage- 
ment wage  of  $1,568. 

The  six  farms  which  were  above  the  average  in  two  factors  earned 
5.79  percent  on  the  investment,  or  a  labor  and  management  wage 
of  $965. 

The  five  farms  which  were  above  the  average  in  only  one  factor, 
or  failed  to  be  above  the  average  in  any  of  the  five  factors,  earned  4.03 
percent  on  the  investment,  or  lacked  an  average  of  $65  in  earning  any 
labor  and  management  wage. 

A  further  study  of  Table  8  shows  that  the  five  farms  in  the  first 
group  were  better  than  any  of  the  other  groups  in  all  five  factors 
analyzed,  except  in  crop  acres  worked  per  horse.  While  the  farms  in 
the  third  group  had  nearly  as  high  yields,  their  operators  were  much 
less  efficient  in  the  use  of  man  and  horse  labor  and  expenses  were 
much  higher  in  proportion  to  income.  The  best  group  of  farms  far 

Rote 
corned 


five  forms  above 
averwjt  in4fnctors 


Three  farms  above 
average  in 


5ix  farms  above 


Five  farms  above          . ....     ,.-«,,.<,  /  rfrv 

average  in  Oorlfactor  ^^^^^^^ 


FIG.  8. — How  FARM  PROFITS  ARE  AFFECTED  BY  THE  NUMBER  OF  FACTORS  IN 

WHICH  A  FARM  EXCELS 

The  farms  in  the  first  group  returned  a  labor  and  management  wage  of 
$2,465  yearly  to  their  operators.  Those  in  the  last  group  lacked  $65  of  paying  any 
labor  and  management  wage. 


1924} 


INCREASING  FARM  EARNINGS 


171 


exceeded  each  of  the  other  three  groups  in  the  returns  on  the  money 
invested  in  productive  live  stock,  and  a  much  larger  part  of  the  total 
income  of  this  group  came  from  live  stock.  In  other  words  the  men 
who  were  most  successful  with  live  stock  increased  the  size  of  their 
business  by  increasing  the  size  of  the  live-stock  enterprises.  While 
the  farms  of  the  first  group  also  worked  the  most  crop  acres  per  man 
of  any  group,  they  did  not  work  as  many  crop  acres  per  horse  as  the 
second  group.  However,  they  apparently  made  more  efficient  use  of 
their  horse  labor,  since  they  worked  21.5  acres  per  horse  and  used 
tractors  only  17.3  percent  of  the  time  while  the  second  group  worked 
23.2  acres  but  used  tractors  33.3  percent  of  the  time. 

A  study  of  the  size  of  the  farms  as  related  to  income  shows  that 
the  acreage  in  the  farms  was  not  an  important  factor  affecting  earn- 
ings. The  first  group  of  farms  averaged  smaller  in  size  than  any  of 
the  other  groups,  while  the  largest-sized  farms  found  in  any  group 
were  found  in  the  second  group.  Many  studies  made  of  the  effect  of 
the  size  of  the  farm  on  farm  earnings  show  that  with  a  certain  type 
of  farming  there  are  certain  limits  to  the  acreage  that  can  be  operated 


TABLE  8. — THE  NINETEEN  FAKMS  GROUPED  ACCORDING  TO  THE  NUMBER  OF  FACTORS 
IN  WHICH  EACH  FARM  WAS  ABOVE  THE  AVERAGE  OF  THE  NINETEEN  FARMS 


(GROUP  1) 
Farms  above 
average  in 
4  factors 

(GROUP  2) 
Farms  above 
average  in 
3  factors 

(GROUP  3) 
Farms  above 
average  in 
2  factors 

(GROUP  4) 
Farms  above 
average  in 
none  or  one 
factor 

Number  of  farms  

5 

3 

6 

5 

Rate  earned  on  invest- 
ment .  .         

9.31% 

6.63% 

5  79% 

4  03% 

Labor  and  management 
wage  

$2,465.00 

$1,568.00 

$965.00 

$-65.00 

1  .  Crop  index  

125.7 

119.9 

123.4 

123  2 

2.  Returns  from  $100  in- 
vested in  productive 
live  stock    

$    149  55 

$    121.66 

$  83  79 

$    69  46 

Percent  of  income  from 
all  live  stock  

53.1% 

46.7% 

32.6% 

43.8% 

3.  Crop  acres  worked  per 
man  

92.1 

87.3 

83.6 

72.1 

4.  Crop  acres  worked  per 
horse  

21.5 

23.2 

21.3 

17.9 

Percent  of  years  with 
tractor  

17.3% 

33.3% 

50.0% 

37.1% 

5.  Expense  per  $100  gross 
income  

$     30.48 

$     39.68 

$  44.77 

$    51.88 

Investment  per  acre  
Net  income  per  acre  

$    275.00 
$      25  .  60 

$   288.00 
$      19  .  06 

$275.00 
$  15.90 

$  279.00 
$     11  20 

Size  of  farm,  acres  

166.1 

237.1 

215.6 

199.9 

NOTE. — Group  1  includes  Farms 
Farms  7,  9,  10,  13,  15,  16;  Group  4, 


1,  2,  3,  5,  6;  Group  2,  Farms  4,  8,  11;  Group  3, 
Farms  12,  14,  17,  18,  19. 


172  BULLETIN  No.  252  [June, 

economically.  Such  a  study  made  in  Illinois  indicates  that  all  the 
farms  included  in  this  study  were  within  size  limits  which  would  per- 
mit efficient  operation.  It  is  significant  to  note  that  all  five  farms 
making  up  the  first  group  were  family-sized  farms  employing  extra 
labor  only  during  rush  seasons.  It  will  be  noted  from  Table  9  that 
the  smallest  of  the  nineteen  farms  contained  131.4  acres  and  the  largest 
360  acres.  In  this  discussion,  size  of  business  and  size  of  farm  should 
not  be  confused.  As  shown  by  the  gross  income,  net  income,  percent- 
age of  returns  from  live  stock,  and  other  factors,  some  farmers  are 
conducting  a  much  larger  business  than  others  whose  farms  are  of 
equal  area.  The  relative  success  of  these  nineteen  farms  was  evi- 
dently dependent  upon  the  ability  of  the  managers  to  organize  their 
farms  for  efficient  production,  rather  than  upon  the  area  in  the  farms. 
As  previously  noted,  some  of  the  more  successful  live-stock  men  in- 
creased the  size  of  their  farm  business  by  producing  a  larger  amount 
of  live  stock.  Because  of  their  superior  ability  in  handling  live  stock, 
this  activity  increased  their  net  returns.  The  natural  condition  of 
the  soil  and  the  size  of  the  farms  would  have  permitted  a  similar  type 
of  organization  on  all  the  farms. 

Where  a  feed  record  is  available,  one  of  the  most  satisfactory 
measures  of  live-stock  efficiency  is  the  return  from  each  one  hundred 
dollars'  worth  of  feed  fed.  The  keeping  of  a  feed  record  is  the  next 
logical  step  in  farm  accounting  after  the  keeping  of  a  financial  record 
of  the  entire  farm  business.  Since  feed  makes  up  45  to  85  percent 
of  the  cost  of  producing  different  classes  of  live  stock  and  live-stock 
products,  it  is  important  that  a  man  know  whether  or  not  he  is  getting 
good  returns  on  the  feed  used  by  live  stock.  To  some  extent  the 
returns  per  $100  invested  in  productive  live  stock  are  a  measure  of 
feeding  efficiency  when  animals  of  comparable  kind  and  quality  are 
used.  Under  such  conditions,  large  returns  per  $100  invested  in  live 
stock  are  a  good  indication  that  the  live  stock  is  making  good  use 
of  its  feed. 

From  the  facts  gathered  in  this  study  it  was  not  possible  to  ascer- 
tain, in  any  complete  way,  the  effect  that  variations  in  the  prices 
received  for  the  produce  of  the  farms  had  on  their  relative  earnings. 
It  is  true  that  there  were  instances  of  considerable  variation  in  the 
prices  received  by  different  operators  during  the  same  year  for 
products  of  similar  grade.  Such  instances,  however,  were  the  excep- 
tion rather  than  the  rule ;  and  it  should  be  remembered  also  that  the 
men  were  all  farming  under  similar  conditions  in  the  same  commu- 
nity, thus  having  like  opportunity  in  marketing.  Also,  since  these 
data  represent  the  average  results  of  a  seven-year  period,  occasional 
unfortunate  marketing  should  not  greatly  affect  the  average  results 
over  the  full  period. 


1924]  INCREASING  FARM  EARNINGS  173 

A  record  of  the  produce  furnished  by  the  farm  toward  the  living 
of  the  farm  family  would  also  have  been  of  advantage  in  this  study. 
The  value  of  such  produce  per  person  varies  widely  on  different  farms, 
as  is  shown  in  cost  accounting  studies.  In  comparing  the  incomes  of 
different  farms,  the  value  of  the  farm  produce  used  by  the  family 
should  be  taken  into  account. 

In  making  these  suggestions  as  to  ways  of  analyzing  the  farm 
business,  it  is  recognized  that  practices  that  are  best  for  one  farm 
may  not  be  the  best  for  another.  The  analysis  serves  rather  to  sug- 
gest principles  that  apply  to  all  farms.  The  individual  farmer  may 
well  study  the  principles  and  then  adopt  those  practices  that  are  best 
suited  to  his  own  peculiar  conditions. 

The  same  general  principles,  or  factors,  which  account  for  the 
success  or  lack  of  success  on  these  farms,  apply  also  to  farms  in  any 
section  of  the  state.  However,  the  standards  of  accomplishment,  such 
as  the  yields  of  crops,  the  land  handled  per  man  and  per  horse,  and 
the  total  expenses  in  relation  to  gross  income,  will  vary  with  the  kind 
of  soil  and  type  of  farming  followed  in  different  sections  of  the  state. 

A  study  of  the  data  presented  in  this  bulletin  shows  that  no  farm 
excels  in  all  points  of  good  management.  It  also  shows  that  the  farm 
which  does  fairly  well  in  most  of  the  factors  discussed  is  more  likely 
to  prove  profitable  than  the  farm  that  excels  in  one  or  two  factors 
and  does  poorly  in  others.  It  is  of  interest  to  note  that  the  five  farms 
that  were  above  the  average  in  four  or  all  of  the  five  factors  analyzed, 
made  5.28  percent  more  annually  on  the  total  investment  than  the  five 
farms  which  failed  to  be  above  the  average  in  more  than  one  factor. 
The  difference  in  the  yearly  labor  and  management  wage  was  $2,530. 
These  wide  differences  in  farm  earnings  between  the  better  balanced 
and  the  less  well-balanced  of  the  nineteen  farms,  amounting  to  more 
than  $2,500  per  year  as  an  average  of  the  seven  year  period,  explain 
why  some  farmers  are  getting  ahead  much  more  rapidly  than  others. 

In  conclusion,  it  may  be  noted  that  even  the  least  well  balanced  of 
these  nineteen  farms  had  much  better  earnings  than  had  many  other 
farms  that  did  not  keep  records  throughout  the  seven-year  period  but 
on  which  records  were  secured  during  the  last  year  or  two  of  the 
study.  If  the  men  on  these  farms  could  make  a  living  from  them,  it  is 
evident  that  the  better  farmers  would,  in  the  course  of  a  twenty-year 
period,  make  enough  money  to  purchase  and  fully  equip  a  large  farm 
in  the  best  part  of  the  state.  Or  from  another  point  of  view,  the 
increased  earnings  on  the  better  managed  farms  would  make  possi- 
ble a  better  standard  of  living — that  is,  more  modern  conveniences 
in  the  home,  better  education  for  the  children,  and  other  things 
which  help  to  make  life  more  worth  while. 


174 


BULLETIN  No.  252 


[June, 


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50  Percent  of  recei] 
51  Returns  from  $ 
live  stock  .  .  . 

53  Returns  from  $'. 
54  Returns  from  $: 
55  Returns  from  $'. 
56  Returns  from  $! 
57  Returns  from  $1 

182  BULLETIN  No.  252 

NOTE 

MEASURING  A  FARM'S  SUCCESS. — Financial  success  in  farming  depends  upon 
many  factors,  all  of  which  taken  together  determine  the  profits  from  the  farm 
business.  In  the  preparation  of  this  bulletin  emphasis  has  been  placed  upon  two 
measures  of  the  earnings  of  the  farm  as  a  whole:  (a)  the  labor  and  management' 
wage  (also  called  labor  income),  and  (b)  the  rate  earned  on  the  investment.  The 
labor  and  management  wage  is  what  a  man  has  left  to  pay  him  for  his  own  labor 
and  management  after  deducting  all  operating  expenses  and  a  fair  interest  rate 
(5  percent)  for  the  use  of  the  capital  invested  in  the  farm  business.  The  rate 
earned  on  the  investment  is  what  is  left  to  pay  for  the  use  of  the  capital  invested 
and  the  managing  ability  of  the  operator,  after  all  operating  expenses  have  been 
deducted  and  the  operator  has  been  allowed  a  fair  wage  for  his  own  labor. 

The  nineteen  seven-year  farms  described  in  this  bulletin  were  studied  and 
ranked  on  the  basis  of  the  rate  earned  on  the  investment.  This  method  was 
followed  for  two  reasons:  first,  it  avoids  controversy  concerning  the  interest  rate 
to  be  charged  for  the  use  of  farm  capital,  which  arises  in  determining  the  labor 
and  management  wage ;  and  second,  the  authors  believe  that  the  difference  in 
the  income  on  the  nineteen  farms  was  largely  due  to  the  quality  of  the  farm 
business,  and  that  the  rate  earned  is  a  better  measure  of  quality  than  the  labor 
and  management  wage  when  large  investments  varying  widely  in  total  amounts 
are  involved.  When  the  size  of  the  farm  business  especially'  is  to  be  studied,  the 
lanor  and  management  wage  seems  to  be  the  preferable  measure  of  farm  earnings. 
Also,  when  farms  do  not  vary  widely  in  size,  the  labor  and  management  wage  is 
a  good  measure  of  the  farm  business. 

Size  of  business  is  not  emphasized  in  this  study  since  all  the  farms  were  large 
enough  to  have  been  operated  efficiently.  Most  farmers  regard  a  change  in  the 
internal  organization  of  their  farms  as  being  more  easily  accomplished  than  a 
change  in  the  acreage  operated,  especially  if  the  purchase  of  the  land  is  involved. 
The  changes  in  internal  organization  most  profitably  and  readily  made  seem  to  be 
changes  in  the  quality  of  enterprises,  such  as  increased  production  per  animal  and 
per  acre,  or  decreased  cost  of  production.  Frequently,  changes  in  quality  will 
involve  changes  in  the  size  of  the  separate  enterprises  within  the  farm  business. 
It  seems  to  the  writers,  however,  that  the  quality  of  the  individual  farm  enter- 
prises should  be  studied  before  recommendations  are  made  regarding  the  increasing 
or  decreasing  of  the  size  of  the  enterprises.  If  a  man  is  making  more  than  a 
normal  rate  of  interest  on  his  investment,  it  is  to  his  advantage  to  increase  the 
size  of  his  business  as  long  as  the  additional  capital  which  he  invests  will  earn 
more  than  the  going  rate  of  interest  on  borrowed  capital.  Likewise,  the  success- 
ful handling  of  an  individual  enterprise  on  the  farm  should  encourage  a  man  to 
increase  the  size  of  that  enterprise  in  so  far  as  it  does  not  interfere  with  the 
efficient  operation  of  the  farm  as  a  whole. 

In  all  analyses  of  the  nineteen  farms  given  in  this  bulletin,  both  the  rate 
earned  on  the  investment  and  the  labor  and  management  wage  are  shown,  but 
the  farms  are  ranked  on  the  basis  of  the  rate  earned  on  the  investment. 


—70 


UNIVERSITY  OF  ILLINOIS-URBANA 


